ECON 120W Lecture Notes - Lecture 3: Profit Maximization, Competitive Equilibrium, Perfect Competition

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mauvebeetle363

25 Sep 2020

School

University of Waterloo

Department

Economics

Course

ECON 120W

Professor

Ziss

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Profit maximization and long-run competitive equilibrium (a) if p = 45 then what q maximizes ? (b) at what p should the firm shutdown? (c) if min atc. = min lrac that what is p in the long-run. Perfect competition and an increase in demand: in the short-run an increase in demand causes Each firm q along their mc curves profits and are positive: adjustment to long-run equilibrium. Entry continues until p = min lrac and profits = 0: in the long-run an increase in demand causes

Related Questions

1. A firm that is a pure competitor has P > ATC and P > MC on the output (Q) it is presently producing and selling. Is this firm maximizing its profits? If not, which direction should it change its output if it wants to maximize its total profit?

2. Is a pure competitor in short-run or long-run equilibrium if it has P=MC=ATC? Explain.

3. There is free entry in the model of pure competition. Assuming that P > ATC for a vast number of firms producing a standardized product for a given market, what will happen to market supply as the consequence? What will happen to the market price (P) of the product these firms are producing?

4. Firms in the pure competition have horizontal demand functions. (The market determines product price, so firms in this competitive market are price takers.) Do firms in this model have to lower prices if they want to sell more output? Why or why not?

copperporcupine291

1. Suppose you are given the following information about a particular industry:

Market demand : Q^D = 6500-100P

Market supply : Q^S = 1200P

Firm total cost function: C(q) = 722 + q^2/200

Firm marginal cost function: MC(q)=2q/200

Assume that all firms are identical and that the market is competitive.

a. Find the equilibrium market price and quantity, the output supplied by the firm, and the firm's profits.

b. Would you expect to see entry into or exit from the industry in the long-run? Explain. What effect will entry or exit have on market equilibrium?

c. What is the lowest price at which each firm would sell its output in the long run? Is profit positive, negative, or zero at this price? Explain.

d.What is the lowest price at which each firm would sell its output in the short run? Is profit positive, negative, or zero at this price? Explain.

lavenderdinosaur371

Suppose you are given the following information about an industry:

Qd = 6500 - 100P Market Demand

Qs = 1200P Market Supply

Assume further that a representative firm's cost function is::

C(q)= 722 + q^2 / 200 and Marginal cost of

MC(q) = q / 100

Assume further that firms are identical and the market is characterized by perfect competition.

A) Find the equilibrium price and quantity and the output the firm will produce in the short run. What is the profit of each firm?

B) Would you expect entry or exit to this industry in the long run? Explain. What effect would such entry/exit have on the market equilibrium?

C) What is the lowest price the firms may survive in the long-run? Is profit positive, negative, or zero at that price?

D) What is the lowest price the firm may sell in the short-run? Is profit positive, negative, or zero at that price?

pearferret188

ECON 120W Lecture Notes - Lecture 3: Profit Maximization, Competitive Equilibrium, Perfect Competition

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